Market Multiple Levels: S&P 500 Chart

What’s in Today’s Report:

  • Market Multiple Levels – S&P 500 Chart
  • What the Midterms Mean for Markets

Stock futures have stabilized after yesterday’s midterm-induced declines and Treasury yields are modestly lower this morning as the focus turns to today’s all-important CPI data.

It was a quiet night of news and there were no market-moving economic reports overseas.

Today, trader focus will be on the October CPI report (E: 0.7%) due out at 8:30 a.m. ET. We will also get Jobless Claims (E: 221K) before the opening.

The Fed speaker circuit picks up as well today with Harker (9:00 a.m. ET), Logan (9:35 a.m. ET), George (1:30 p.m. ET), and Williams (6:35 p.m. ET) all scheduled to speak today.

Bottom line, today’s CPI report is likely to make or break the latest attempt at a broad-based relief rally. If the data is hot and Treasuries decline (yields rise) in a hawkish manner, expect further pressure on equities. Conversely, if CPI is “cooler” than expected and Fed speak is on the dovish side, the S&P 500 could retest recent highs near 3,900.

Market Multiple Table: November Update

What’s in Today’s Report:

  • Market Multiple Table – November Update
  • Chart – Value Stocks Down Just 5% YTD vs. More than 33% for Growth Stocks

Futures are lower while bond yields and the dollar are edging higher after Republicans likely took control of the House but disappointed versus expectations in the Senate races. The result is still seen as being some form of a split Congress, however, which is historically favorable for markets.

Economically, Chinese CPI fell to 2.1% vs. (E) 2.4% Y/Y and PPI was -1.3% vs. (E) -1.6% but the data did not move markets overnight as the focus in China is on reopening plans and not inflation pressures.

Looking into today’s session, there are no market-moving economic reports which will leave the focus on the midterm election results, and if Democrats do end up keeping the House (which is possible, but unlikely) expect a mild reversal of the WTD gains.

Outside of the election news, there are two Fed officials speaking today: Barkin (11:00 a.m. ET) and Kashkari (1:00 p.m. ET) and a 10-Yr Treasury Note auction at 1:00 p.m. ET. Any meaningful dovish commentary or a strong auction could support a near-term equity rally but moves should be limited ahead of tomorrow’s CPI report.

Election Preview

What’s in Today’s Report:

  • Election Preview
  • Chart: Technicals Dominate S&P 500 Price Action – Key Levels to Watch

Stock futures are slightly higher and Treasury yields are largely steady ahead of today’s midterm elections.

Economically, the U.S. NFIB Small Business Optimism Index came in at 91.3 vs. (E) 91.8 while Eurozone Retail Sales met estimates at 0.4% but neither release is materially impacting markets this morning.

There are no additional economic reports today and no Fed officials are scheduled to speak.

In Monday’s Sevens Report we incorrectly said CPI was to be released on Wednesday but the report is due out on Thursday. We apologize for any confusion this may have caused.

Bottom line, focus will be on the midterms today which will likely result in a mostly quiet session, however, there is a 3-Yr Treasury Note auction at 1:00 p.m. ET that could cause a move in yields and ultimately impact trading in equities.

What Falls First, Treasury Yields or Earnings?

What’s in Today’s Report:

  • Key Market Question:  What Falls First, Treasury Yields or Earnings?
  • Weekly Market Preview:  All About Inflation
  • Weekly Economic Cheat Sheet:  CPI on Thursday is the Key Report

Futures are modestly higher mostly on momentum from Friday’s rally and despite negative COVID news from China and an APPL warning on I-Phone production.

Reports over the weekend pushed back on Chinese authorities abandoning the “Zero COVID” policy, although markets still expect some relaxing of restrictions.

APPL warned that COVID restrictions in China will impact IPhone production, although demand remains strong (so the news isn’t materially impacting the stock).

Today there are no notable economic reports but there are three Fed speakers: Mester (3:40 p.m. ET), Collins (3:40 p.m. ET) and Barkin (6:00 p.m. ET).  If they even slightly push back on the idea that “Terminal” Fed Funds will be higher than expected in September, as Evans did on Friday, then stocks can extend this rebound.

A Tale of Two Markets?

What’s in Today’s Report:

  • A Tale of Two Markets?

Futures are moderately lower following another disappointing night of earnings.

AMZN became the latest mega-cap tech stock to miss earnings and the stock fell more than 10% after hours.  AAPL posted “ok” results and rose 1% overnight.

Economically, the Italian CPI was hotter than expected (11.9% vs. (E) 9.7% yoy) as inflation remains sticky in the EU.

Focus today will be on inflation data, specifically the Core PCE Price Index (0.5% m/m, 5.2% y/y).  If this number comes in under expectations, that’ll be a mild positive for markets.  Also on the inflation front, the Employment Cost Index (E: 1.2% q/q, 5.0% y/y) will be closely watched by the Fed, while the University of Michigan Five Year Inflation Expectations will be released inside of the Consumer Sentiment report (E: 59.7).  If those five-year expectations can drop further below 3%, that will be a positive for markets.

Other notable releases today include Pending Home Sales Index (E: -3.8%) and a few notable earnings results:  XOM ($3.88), CVX ($5.02), CL ($0.74).

Is a Dovish Hike the Same as a Fed Pivot? No.

What’s in Today’s Report:

  • Is a Dovish Hike the same as a Fed Pivot?  No.  Here’s Why.
  • EIA Update and Oil Analysis

Futures are little changed as rising hope of smaller than expected future rate hikes is being offset by ugly tech earnings.

Meta (FB) missed earnings and posted underwhelming guidance and the stock fell nearly 20% after hours, continuing this week’s trend of disappointing tech earnings.

Today will be a busy day of earnings and economic data.  The most important events of the day will come after the close via the AAPL ($1.26), AMZN ($0.22), INTC ($0.34) earnings, and given the disappointing tech earnings so far this week, the market will need solid numbers today.

Outside of those earnings, other key events today include the ECB Rate Decision (E: 75 bps hike), Durable Goods Orders (E: 0.6%), Jobless Claims (E: 223K) and Preliminary Q3 GDP (E: 2.3%) and the market will be looking for “just right” outcomes from each (an ECB that’s not too hawkish, and U.S. economic data that’s not too good or not too bad).

How Far Could This Relief Rally Run?

What’s in Today’s Report:

  • Technical Support for a Near Term Bottom and How Far This Relief Rally Could Run
  • Chart: 10-Yr Note Futures Test Trend Resistance
  • Housing Market Update

Stock futures are trading lower this morning as soft tech earnings are overshadowing a continued bounce in bonds.

MSFT and GOOGL both fell roughly 6% overnight after delivering disappointing quarterly results yesterday afternoon which is dragging the broader tech sector lower in premarket trading.

Today, there are two economic reports to watch in the morning: International Trade in Goods (E: -$87.8B) and New Home Sales (E: 585K), while there is a 5-Yr Treasury Note auction in the early afternoon (1:00 p.m. ET).

Earnings will remain in focus today with BA (-$0.01), BMY ($1.83), HLT ($1.25), KHC ($0.55), and HOG ($1.45) reporting before the bell, and META ($1.88), F ($0.31), and CP ($0.77) releasing results after the close.

Bottom line, soft earnings out of mega-cap tech are weighing on the market this morning however stable bond markets are limiting losses. If we see Treasuries roll over today and yields begin to climb again, expect pressure on equities to pick up as both earnings expectations and multiple compression will weigh on stocks broadly.

Three Keys to a Bottom Updated

What’s in Today’s Report:

  • Three Keys to a Bottom Updated
  • Was Friday’s WSJ Article A “Fed Pivot?”  No.  Here’s Why.
  • Weekly Market Preview:  The Height of Earnings Season
  • Weekly Economic Cheat Sheet:  More Hints of Stagflation?

Futures are slightly higher as momentum from Friday’s close offset steep losses in Chinese markets.

The Hang Seng fell 6% as Premier Xi emerged from China’s National Conference with an even tighter grip on power, ensuring continued “zero COVID” policies and heightened tensions with the West.

Economically, the Euro Zone and UK flash PMIs missed estimates as both remained below 50 (47.1 and 47.2 respectively).

This week will being a deluge of critical earnings reports but that doesn’t’ start until tomorrow, so focus today will be on the flash PMIs (October Flash Manufacturing PMI (E: 51.2), October Flash Services PMI (E: 49.3)) and if those numbers show solid activity and falling prices, stocks can extend the rally.

Incremental Positive Developments

What’s in Today’s Report:

  • Bottom Line – Incremental Positive Developments, But Not Enough for a Bottom
  • Industrial Production Takeaways
  • Chart: 5-Yr Breakevens Continue to Trend Lower Amid Confidence in the Fed
  • Housing Market Index Underscores Cooling Real Estate Market

Futures are slightly higher in more cautious trade this morning as strong earnings from NFLX (+14%)  and UAL (+3%) are helping offset hot inflation data overseas.

UK CPI rose 0.2% to 10.1% vs. (E) 10.0%, revisiting a 40-year high which is bringing inflation back into focus today.

From a catalyst standpoint, there is one economic report to watch today: Housing Starts (1.475M), and two Fed speakers to watch: Kashkari (1:00 p.m. ET) and Evans (6:30 p.m. ET).

There is also a 20-Yr Treasury Bond Auction at 1:00 p.m. ET. If yields rise in the wake of the auction, that could once again weigh on equities.

Finally, earnings continue with: ALLY ($1.73), PG ($1.55), CFG ($1.21), and WGO ($2.99) reporting ahead of the bell, and TSLA ($1.01), IBM ($1.78), AA ($0.09), and PPG ($1.67) releasing their results after the bell.

Bottom line, there have been some incremental fundamental positives that have helped support the relief rally in stocks this week, and if fixed-income markets can remain orderly and earnings continue to surprise to the upside, the S&P 500 could continue towards 3,800 or beyond today.

Sevens Report Analysts Quoted in Market Watch on October 17th, 2022

Oil futures settle slightly lower, extending last week’s sharp loss

“The backdrop of sticky high inflation resulting in increasingly more hawkish Fed policy expectations for the foreseeable future and the subsequent rise in recession fears will likely keep a lid on WTI in the low to mid $90s,” analysts at Sevens Report Research wrote in Monday’s newsletter. Click here to read the full article.